Solar Electricity – Part 2

Is Solar Electricity Expensive? For a moment, let us ignore global warming and pollution, as we always do. We can always complain that somebody else is responsible for that. Now, we are left with the most important question: How expensive is the solar electricity? What is the return of investment?

The calculation of expense is no rocket science. First, you need to determine how much power you want to generate/use through Solar panels. As I mentioned earlier, solar panels cost us Rs.150/watt in retail. You can get a better deal if you go in bulk. Some applications need battery, inverter and/or special lights/fans. The math is easy and I will come to that in a later post. But first, let us talk about the ROI. The simple answer is: it depends on the application. Here are some scenarios I can think of:

1. Setting up a power plant (say 1MW) and feeding the grid: In this case, government will buy power from you. I have second hand information that they buy it at a rate of Rs.16/kilowatt in Karnataka. Setting up this power plant will cost Rs.22crores. This would roughly generate Rs.3.5 crores of revenue per year after discounting maintenance expenses. That is solid 16% return year over year for next 20 years. Or, you will get the investment back in around 6 years. Some people claim that it could be as good as 4 years (or 25% returns every year).

2. Replace the Diesel power generator with Solar generator: A good diesel generator produces 2.5KWh per 1 liter of fuel (say cost of Rs.50). That means, Rs.20 per KWh (BTW, 1KWh is what we typically refer as 1 unit in our electricity bill). The solar generator to produce equivalent amount of energy per day would cost around Rs.1.2lakhs. Your savings are Rs.15K/year. That is 12.5% returns or you can get the investment back in 8 years

3. Let your house run on Solar power in a city without many power cuts: Following similar calculations, it will take 18-20 years before you recover the investment. Not a good investment. We only pay Rs.5/unit in most of the places in India.

4. A house without electricity (poor people’s house in a remote villege or a remote farm house): With Rs.10K, you can have 3-4 lights. Additional Rs.25K – you have fan running whole night. It will take another Rs.40K to support a color TV for 4-5 hours a day. The value: Priceless. The same applies to a hawker replacing a kerosene/gas lantern with Solar Lantern.

On category 4, there is a catch. Most of the people who fall into this category are either ultra-poor and/or completely ignorant of Solar Power.

Most of you, reading this post (including myself), are probably in category 3. In cities, you may not want to go for complete Solarization of our houses from the economic perspective, unless you are a die hard green energy fan.

Option 1 is for big guys, unless, at a later point of time, someone comes up with a ‘shared’ project (eg. 1000 people can invest Rs.2.5lakhs each). They can get 16% returns consistently. This is less riskier than stock market investing and better returns than bank interest (but, don’t compare apple-to-apple with bank interest)

Option 2 is generally for businesses/companies/factories etc. Next time, when you see somebody using Diesel generator, you know that there is a better option (considering the pollution and the noise).

Now, you know why people in developed countries didn’t go for Solar Electricity for such a long time- ‘they don’t have power cuts’. Again, why didn’t the people in poor countries go for it? They don’t have money and/or awareness.

Sorry for too many numbers in this post. But, it is hard to explain money without numbers ☺. Luckily, we have other options. The world is changing. The time has come. There are small ‘entry points’ for common people like us. Let us discuss them in next post. — Author of this article is Raghavendra Ijjada, who is experimenting with Solar Energy. See the first post of this series for more info. In the mean while if any of you are looking to author a guest post here on a topic that interests you, feel free to contact me :)

Comments

I’m in the U.S. and just stumbled upon your website. I do wish that we had some informational solar websites – as it is, if you don’t have bucks you’re left in dark (pun intentional). Where I’m living it’s impossible to live without power and solar is way too expensive for me. I’ve started very slow and inexpensive, but mostly doing without. Thanks for the great article.

well you have answered all the questions in a very easy to understand way…..though many would want at least some return of investment we need to understand that it offers us a very good GO GREEN option.When we buy a very expensive gadget like a cell phone or a camera we never think of any returns ,so why here.I am sharing this series on my FB profile.Great step Mohan…you and Raghav are doing a great service here.

You should get these published. To me , they do seem worth sharing & even implementing !! For starters, you could try it in your workplace.

But although your topic was based on the ROI, it looks like we are yet to hit upon a good idea for all strata of people which would be beneficial. It remains elusive.. Or is it gonna be answered in part 3? let me read..

Rohita, go ahead and spread the word by using all those social bookmark options provided at the bottom of the post. You can Buzz it, share on facebook, twitter etc… join hands in spreading the awareness :)

Kudos to u for outlining the options so well in layman language. If only initial costs were manageable, people from Group4 would have benefited so much from this. But, we can still go for it without thinking much about Return on Investment is what I feel. Waiting for the next one :)

I know that Dad’s company once provided solar emergency lights to all of them and its really superb! Been so many yrs now but there hs been absolutely no problem @ all.

I also feel it would be wrong to expect any in the form of ‘Return of investment’ from such noble causes. Prices of the product should be moderate enough that people can afford to go for this and should be able to compare the cost with readily available sources of energy. I am all game. Looking for the next post about the products that we can use :)

a good read but u know i have a solar water heater installed in my house and when we were installing it about 4 yrs back we explored the option of enhancing it so that couple of lights could be run from it and the expense was almost double plus the fact that it requires a complete separate wiring than the normal electricity which I think is the major plus point for having a inverter/generator as a power backup … i dont know whether things have changed since then though

That is very much the case with me :) However, while constructing the house 4 years back, I have ensured to draw a separate line to all the rooms to operate lighting upon the solar or any other alternate energy! Hope I get to materialize on that when the cost comes down. Raghav would be able to give us a better info on that.

I don’t think we should be considering the fact of ‘Return On Investment’ that deeply when going for technologies that are helping us to go green. There is no doubt the cost would be on the higher side for solar electricity for initial set up, but the benefit is we are getting more environmental friendly and as the mass production happens the cost will come down. We all need to think of it as a gesture of being environmental friendly than being thought of as investment.

This is the right direction. eg. we may think twice (or ten times) to convert whole house to run on Solar electricity by spending 3-4 lakhs. But, we should not be digging deep to buy a solar fan/lights for under Rs.5000 (unfortunately, many people do).

once my friend had a solar cooker, and cooking in this was so easy and food was very tasty even, and I always wondered why they don’t promote it in India, where there is such a strong sun…its a healthy and environment friendly also.